Wednesday, January 26, 2011

Change of tune?

You know it's really getting sad when the media equates a reduced rate of credit growth in Canada to "people getting the message" on changing their spending habits. Instead of pointing out many Canadians just can't get any more credit, they try to make Canadians think they've heard the message and they're voluntarily slowing down their free-money spending binge. OK, sure, whatever.

Key points:
  • Mortgages outstanding are still rising at almost 7 per cent, year over year, but a monthly trend indicates the rate seen during the recession.
  • Mortgage arrears appear to have peaked, though they're stabilizing at twice the pace in the recession. That's still below the rates of past slumps.
  • Lines of credit are growing at 0.3 per cent a month, the slowest since 2007.
  • Debt is still rising at a pace that eclipses income, but not assets.
  • Debt interest payments now represent 7.2 per cent of disposable income, the lowest since mid-2006. (Think this might be because interest rates are the lowest since mid-2006? Rocket meet scientist)
  • Consumer bankruptcies are "in a clear downward trend."
  • There's a similar trend in delinquencies on consumer loans.
Emphasis mine. There's a reason why spending and borrowing are still growing, but at a slower rate than a year ago: the taps are slowly being turned off, interest rates are very slightly higher than they were one year ago and the pool of spenders are at or near the maximum in terms of their available credit. The situation isn't "getting better" because tapped-out consumers are "heeding the warnings."

In the interest of balance, it is true that asset growth is outpacing debt accumulation. You can thank a very robust stock market and a rebound in housing prices for this--both markets grew abnormally fast over the past 12 months, so this little indicator should be taken for what it is, not used to justify current debt accumulation trends.

The last few puffs into a balloon always seem to feel slower than the first don't they?

16 comments:

a simple man said...

I have no debts to anyone in the world and I feel good!

Leave my inexpensive rental in Oak Bay to enter servitude at these prices? Never.

Bring on the spring market.

kabloona said...

Meanwhile....

More fallout from the Bear Mountain fiasco:

http://tinyurl.com/68o86fd


"Current, former NHL players lose more than $13-million in resort deal

DAVID SHOALTS AND ERIC DUHATSCHEK
From Wednesday's Globe and Mail
Published Wednesday, Jan. 26, 2011 8:59AM EST

Len Barrie’s misadventures in leading the Bear Mountain golf resort and real-estate development into bankruptcy left more than 100 angry investors and creditors in his wake, including 18 current and former National Hockey League players who lost a total of more than $13-million.

Sean Burke, goaltender coach for the Phoenix Coyotes, is one of the unfortunate 18, having lost more than $600,000. What angers him more than losing the money is the impression Barrie, who used his share of Bear Mountain to help buy part of the Tampa Bay Lightning in 2008, is not going to face any consequences.

“How does a guy get away with being able to build something to that level, with everybody else’s money, and then not be accountable at the end of the day?” Burke said. “He’s walking away with a hell of a lot more than he ever walked in [with], whereas everybody else is walking away with nothing.”

Uhhh.... because Lennie may be just a stupid hockey player - but he's still smarter than you, Sean....

Now go invest some cash with Trevor Linden....

;-)

Rhino said...

I love how Len Barrie says with what I imagine is a dismissive tone:
"What can you do? The world blew up. It was one of those things that happens. It didn’t work out."

what an a$$hole

Just Jack said...

Bear Mountain is the poster child of why this market went wrong.

From the beginning Bear Mountain was economically unfeasible. The cost to develop a hunk of rock versus the total price of the lots showed that the complex was doomed. But, bank presidents thought they knew better than their professional advisers, so the project went forward.

Increasing lot prices saved Barrie's bacon many a time. But cost were catching up and eventually surpassed the projected gross selling prices.

Do I feel sorry, that some hockey schmuck lost 600 large? Not a chance, the schmuck wanted to make a fortune, he chose not to inform himself, gambled, and lost.

Sour hockey pucks

Marko said...

4414 Majestic, 20k over asking.

Marko

HouseHuntVictoria said...

@Marko,

Not surprising. That place, along with a few others in GH over the past couple months have been priced under market value.

There's been a pattern of dropping "needs updating" i.e., requires significant work, gordon head homes on the market priced $50K or more below what other places requiring no work to live in are selling for.

phil said...

Another 6+ years before prices bottom in the US.

http://www.cnbc.com/id/41295173/

Marko said...

Lack of new home inventory is keep prices very high in this segment...two sales in last two day!

28 Tawny Place
258 Days on Market
Sold: $837,000
Original Asking: 850k

31 Channery Place
100 Days on Market
Sold: 815,000
Original Asking: 779k + HST


I will say this for the 100x time, in my opinion there is a serious lack of inventory for building lots, even in Langford now that Bear Mountain has stalled.

350-450k for a building lot does not translate into affordable homes.

a simple man said...

Agreed Marko - my wife and I have all but given up the hope of an affordable build becuase of high land prices...Instead we will look for the right house to reno - especially given Oak Bays stringent building codes.

kabloona said...

Thanks phil, good catch on that link from CNBC. About three years ago I told everybody who would listen that the US wouldn't hit bottom until 2012...maybe I was being too optimistic.

:-)

jesse said...

"Another 6+ years before prices bottom in the US."

The US crash started in 2006. That would work out to about 11 years peak to trough.

Victoria's at 6 months.

Robert Reynolds - HMR Insurance said...

Interesting program on Len Barrie and Bear Mountain this morning on CBC 1. I will try and post the podcast when it's up.

patriotz said...

"Another 6+ years before prices bottom in the US."

That would be the nominal bottom. The real bottom is decades out, because real incomes in the US are going to keep falling barring some miracle.

Same goes for here.

Leo S said...

'ees not dead, 'ees resting!

Lower end market is still pining for the fjords. In January I have 4 sales of SFH up to 550k in the core areas*.

That compares to ~21 in December, and ~40 in November. I know it's supposed to be the slowest month or close to it, but 5 times fewer sales than Dec?

*District: 'Victoria, Victoria West, Esquimalt, Saanich East, Saanich West'
Property Type: 'Single Family'
Listing Status: 'Active'
Current Price: Maximum '$550,000'
Title: 'Freehold, Bare Land Strata'

Just Jack said...

Sales Volumes for all types of properties in the GVRD for the month of January of each year

1999 - 260 the market is idling at the start line

2000 -254 market is still idling
2001 -289 starts creeping forward
2002 -461 the tires are smoking up
2003- 437 this aint your dad's buick, hold on Alice
2004 -428 its a friggin Bugatti Veyron
2005- 432 with Nitrox Oxide
2006- 431 and no brakes
2007- 387 switching tanks
2008- 406 to the moon Alice
2009- 255 hit the brakes Alice, I think there's a brick wall ahead
2010 -361 nope it was a mirage

2011 - January estimate of volume of sales is...

273

- "for Christ's sakes Alice, we're outta road, jump!"

Mr.4AM said...
This comment has been removed by the author.